EUR 3.72 For Business Accounts Only

Intermarket Pulse: Pakistan Cements: Earnings to grow by 12%YoY despite rising cost pressures

• •We expect IMS Cement Universe to post profit growth of 12%YoY (ex-FCCL: 25%YoY) in 3QFY17, primarily led by 11%YoY growth in local dispatches, increasing efficiencies and high proportion of local dispatches, despite rising input costs (Coal up 64%; FO up 106%YoY).

• •Growth will majorly be led by CHCC (EPS: PkR4.29, up 106%YoY), LUCK (EPS: PkR15.91, up 33%YoY) and MLCF (EPS: PkR2.60, up 18%YoY). We expect DGKC (EPS: PkR5.59, up 6%YoY) and PIOC (EPS: PkR3.54, up 6%YoY) to post slower EPS growth due to limited scalability in dispatches, while FCCL (EPS: PkR0.48, down 58%YoY) may continue to disappoint.

• •We maintain Buy stance on MLCF (TP: PkR149), DGKC (TP: PkR269) and FCCL (TP: PkR48), while PIOC (Bull case TP: PkR203) and CHCC (Bull Case TP: PkR269) may offer additional upside after accounting for new expansions.